Spotlight: Lula's first orders of business

Within hours after taking office, Brazil’s President Luiz Inácio Lula da Silva reversed several measures implemented by his predecessor, Jair Bolsonaro.

"Lula is putting into practice what was promised throughout the presidential campaign, which is a less liberal economic policy and greater weight of the State," Lucas Fernandes, a political analyst at local consulting firm BMJ Consultores, told BNamericas. 

Lula suspended structuring processes for privatizations of eight firms, including Petrobras, Pré-Sal Petróleo – which supervises and sells the hydrocarbons from production-sharing contracts – and postal service Correios.

He also reestablished the Fundo Amazônia fund that finances sustainable projects in the Amazon.

"We are going to see a Lula administration placing a lot of emphasis on the environmental agenda, so on that side, I believe that in the coming weeks we will have more measures [strengthening inspections to combat deforestation]," said Fernandes.

Fundo Amazônia was created in 2008 and supported over 100 projects, but main donors Germany and Norway stopped contributing in 2019, after Bolsonaro weakened the fund and environmental protections.

Bolsonaro also encouraged illegal artisanal mining in the Amazon, while Lula is expected to fight the practice.

SANITATION

Sanitation regulator ANA returns to the purview of the environmental ministry. Bolsonaro put ANA under the regional development ministry’s supervision to facilitate concessions and privatizations.

The changes are likely to lead to a focus on rivers, rather than advancing concessions.

FUEL TAX

Measures related to the fuel tax could prove difficult to reverse.

As part of his reelection strategy, Bolsonaro reduced taxes on gasoline and diesel, among others. The measure was set to expire in December 2022, but Lula extended it through February to avoid an inflationary shock.

Fuel prices have been a key inflation driver and some analysts even said they contributed to Bolsonaro’s election defeat. Petrobras sets fuel prices in line with international market prices, but the policy was criticized even by Bolsonaro, who also tried to circumvent it.

With the extension, Lula wants to buy time to create a new pricing model, without having to resort to tax cuts. "We will have a period of volatility for Petrobras shares until a new fuel pricing model is announced," Fernandes said. 

STATE FIRM LEADERSHIPS

Lawyer and economist Jean Paul Prates was announced as new Petrobras CEO. He gave legal advice to Petrobras’ international unit, Braspetro, in the 1980s and founded Brazil's first oil industry consultancy in 1991.

In 1997, he participated in drafting the federal petroleum law, which ended Petrobras' monopoly in the exploration and production segment. He also drafted Brazil’s concession contract and the royalties decree.

Tarciana Medeiros and Maria Rita Serrano were appointed to helm Banco do Brasil and Caixa Econômica Federal, which are among Brazil’s largest banks in terms of asset and loan portfolios.

Both have long career trajectories at the banks. Bolsonaro had preferred executives coming from the private sector.